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72nd Annual Summer Conference, August 7–10, 2003

Is There a NAFTA+?
Maybe, but probably not for a while.

By Stephen R. Kelly, Deputy Chief of Mission, U.S. Embassy, Ottawa

I – Introduction

A. Much discussion in Canada about major new moves in N.A. Integration

  • Big ideas, grand bargain two of many terms.
  • NAFTA PLUS is another term that has gained currency
  • Polling suggests majority of Canadians favor N.A. integration as long as their identify can be protected.
  • Mexican Ambassador suggested her government favors moving ahead soon.

B. While many exciting proposals have been made, and many in the U.S. are interested in nurturing this, a number of factors are working against major changes in near term.

C. Probably best for now to focus on concrete specific areas that have obvious interest and impact.

II – Problems with NAFTA +

A. The name – just deciding what to call it reveals deeper problems.

  • At least in some U.S. circles, belief that the term NAFTA should be avoided.
  • Implies trilateral – limits the number of issues that are truly trilateral in practice.
  • Deals with trade, yet much of what’s under discussion goes beyond trade, e.g., immigration, security, common currency.

B. Lessons from 9/11 and Smart Border Declaration

  • Attacks produced need political will to deal with long-standing border problems.
  • Also harnessed long-lacking high-level political attention to ride herd on border action plan, i.e., Ridge-Manley
  • Many have suggested similar structure could help propel a NAFTA+ agenda
  • Although we have tried this over the last year or so, lacking a cataclysmic event like 9/11, and with competing events like Iraq, getting the needed critical mass has been difficult.
  • No blessing as yet from political level in U.S. or Canada.

C. Leadership transition for next year and a half – two years makes getting political engagement on both sides more difficult.

  • New government in Canada probably won’t be in place with a mandate until late spring 2004.
  • By that time U.S. presidential elections will be in full swing.
  • June elections in Mexico saw a loss of 50 seats by President Fox’s party.
  • Spring 2005 may be earliest you could have leaders ready to bear down on this, perhaps even later.

III – Perhaps better for now to think incrementally.

A. Talking about NAFTA+ or “big ideas” triggers sovereignty concerns and difficult domestic issues.

  • Labor mobility in N.A., a component of many broadbrush ideas, could not occur until you have labor mobility between Ontario and Quebec.
  • Concentrating on more limited, specific issues helps avoid this reflex.
  • Incremental change has the added advantage of requiring fewer “hard choices”. Grand bargains can imply significant and perhaps costly concessions, whereas incremental change can be limited to cases where everyone (or nearly everyone) gains something.

B. No lack of areas to work on.

  • Standards – why do we have different requirements for cars or breakfast cereals or licenses for drivers who haul hazardous materials? BSE good example of merits on single continental standards.
  • Energy – what could we do to promote a more efficient N.A. energy market, recognizing that barriers to energy trade are more often internal than external. Coordinate R&D, pipeline safety.
  • External tariffs – 3058 items where Canada and U.S. have 0% tariff. Only 24 where all three countries have zero rate. May be ways to cut paperwork on these items. Incentive to Mexico to harmonize.
  • Border efficiency and security – much work remains on both borders.

IV. Conclusion.

A. N.A. integration is happening continuously at the grass roots anyway.

  • This is all for the good, and can occur with or without elite intervention.

B. Since the timing for a top-down process may not be good, perhaps better to work on what the actors and markets are ready to handle.